Best Affirms Berkley (Europe) ‘A’ Rating

A.M. Best Co. has affirmed the financial strength rating of “A” (Excellent) and the issuer credit rating (ICR) of “a” of London-based W.R. Berkley Insurance (Europe) Limited (WRBIEL) with a stable outlook.

Best said that it its opinion “WRBIEL’s stand-alone risk-adjusted capitalization is likely to remain excellent at year end 2006, benefiting from 100 percent retention of earnings of approximately £4-5 million [$7.63 to $9.54 million] (compared to £7.6 million [$14.5 million] during 2005). The ratings also factor explicit support in the form of a net worth maintenance agreement provided by W.R. Berkley Corporation and reinsurance support, with approximately 25 percent of gross written premiums in 2006 likely to be ceded to W.R. Berkley affiliates.”

Best also said it “believes WRBIEL’s prospective financial performance is likely to remain very good following the excellent 17.9 percent return in 2005. The return for 2006 will reflect an anticipated weakening in the company’s technical performance (from the 2005 combined ratio of 95.6 percent) due to softening in market conditions for professional indemnity (PI) business written in the United Kingdom–approximately 70 percent of WRBIEL’s anticipated 2006 net written premium.

“However, this factor is likely to be partially offset by WRBIEL’s entry into the less competitive medical malpractice and PI markets in Spain. Performance will also continue to benefit from commissions received from participation in a consortium agreement on property reinsurance business with R.J. Kiln and Company Limited (Kiln) and from a solid investment return.

“WRBIEL has a good specialist business position as a provider of niche PI products for small to medium-sized enterprises (SMEs) in the London and regional UK markets. By year-end 2006, A.M. Best expects an increase in overall gross written premiums (GWP) of approximately 5 percent to £100 million [$190 million], including the Kiln portfolio which is likely to account for approximately 20 percent of GWP. This growth is mainly attributable to the increased business written through WRBIEL’s new Spanish operation (with GWP anticipated by year-end 2006 of GBP 6-8 million), a new personal accident portfolio as well as continuing development of its regional UK account.”